01715cam a22002297 4500001000600000003000500006005001700011008004100028100002600069245012600095260006600221490004100287500001400328520078300342530006101125538007201186538003601258710004201294830007601336856003701412856003601449w0891NBER20180217233710.0180217s1982 mau||||fs|||| 000 0 eng d1 aBlanchard, Olivier J.14aThe Production and Inventory Behavior of the American Automobile Industryh[electronic resource] /cOlivier J. Blanchard. aCambridge, Mass.bNational Bureau of Economic Researchc1982.1 aNBER working paper seriesvno. w0891 aMay 1982.3 aUnderstanding inventory movements is central to an understanding of business cycles. This paper presents an empirical study of the behavior of inventories in the automobile industry. It finds that inventory behavior is well explained by the assumption of intertemporal optimization with rational expectations. The underlying cost structure appears to have substantial costs of changing production as well as substantial costs of being away from target inventory, the latter being a function of current sales. Given this cost structure, whether inventory behavior is stabilizing or destabilizing depends on the characteristics of the demand process. In the automobile industry, inventory behavior is destabilizing: the variance of production is larger than the variance of sales. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w0891.4 uhttp://www.nber.org/papers/w089141uhttp://dx.doi.org/10.3386/w0891